“Do I have enough money to retire?” There was a time when that relatively simple question lay at the center of retirement planning. Today, however, the landscape has changed dramatically. These days, most retirees are living longer than ever, and retirement planners and financial advisors are adjusting their advice accordingly.
That was our take-away from this recent Kiplinger article in which writer MP Dunleavey sets out to answer the important question, “How should we think about money and aging today?” As we look around, we see many seniors struggling to maintain even a modest lifestyle, in part because they are living longer than they ever anticipated or planned for. How do we adjust our thinking so that we don’t outlive our resources? At the same time, how do we make a plan that adds life to our days, not just days to our lives?
Dunleavey’s article was long, and we’ve shortened her words for space, but her emphasis on planning for longevity mirrors what Rajiv has been saying for years. Let’s dive deeper.
We’re Living Longer, but Not Necessarily Better
“It’s the conundrum of our time,” Dunleavey begins: “With so many people living longer — and not always better, let’s be honest — how do you craft a financial plan that will deliver your best possible quality of life, for as many years as you need?”
She acknowledges that managing what experts refer to as “longevity risk” requires a fresh approach to retirement planning. “[T]he temptation is to focus on making sure your money lasts as long as you do, and ideally well beyond,” she explains. “And while no one wants to outlive their resources, the new longevity, as it’s been dubbed, is pushing retirees and their advisers to rethink what the components of a truly resilient long-term plan should look like.”
“Welcome to Your Longer Life”
Planning for longevity risk has become the focus for many financial advisors, and the thinking goes beyond money alone.
Dunleavey spoke with Florida-based financial planner Mari Adam. “Ten or 15 years ago, if you talked about longevity most planners took a technical approach: How much do you want to spend? How much growth do you need?” Adam explains. “Now there’s a focus on including softer issues. People are asking, ‘What do I want to be doing with the rest of my life?’ It’s not just about money management.”
Our interpretation: what the article calls “a modern, longevity-centered financial strategy” has to take into account, not just dollars and cents, but quality of life. Makes sense to us.
Navigating Issues of Age, Health, Finances, Family
As retirees age, Dunleavey writes, they often begin to realize that they have more years ahead of them than they had expected. They start asking, “How best to navigate the intersection of time and health, family and friends, business and leisure?”
These “pressing questions” as Dunleavey calls them have to be considered in light of how the older population in the U.S. is growing.
“When you look closely at the numbers,” she writes, “there’s a world of change to consider. In 2022 there were some 58 million Americans 65 and older. Previous assumptions about aging need an overhaul to keep up with the holistic (physical, emotional, financial) needs of older adults.”
Dunleavey adds, “In other words: It’s not enough to think about asset allocation strategies, tax planning and drawdown rates. Getting older happily today starts with a better understanding of longevity itself, a.k.a. longevity literacy.” (Yes, she explains, there is such a thing.)
We Tend to Underestimate Our Own Longevity
Aging is a touchy topic for most of us, for obvious reasons. “Thinking about how long you might live inevitably conjures up thoughts of the alternative — which is why many people skip the topic,” Dunleavey writes. “It’s also why many people tend to underestimate what longevity means.”
Dunleavey spoke with Gal Wettstein, an economist with the Boston College Center for Retirement Research. Wettstein co-authored the 2023 report Longevity Risk: An Essay. As Wettstein told Dunleavey, “The bigger risk is actually the risk of outliving your assets,” Wettstein says. “Yet many people aren’t really thinking about longevity risk.”
Dunleavey quotes 2024 research from the TIAA Institute which reported that one-third of adults surveyed failed to grasp what longevity might mean to retirement plans. The head of the TIAA Institute, Surya Kolluri, calls that “a pretty serious blind spot.” According to Kolluri, TIAA’s research “showed a clear-cut connection between having strong longevity literacy and experiencing better financial outcomes in retirement.”
More Than Money: Longevity Planning Touches All Aspects of Life
“To do a spot check on your longevity literacy, here’s a pop question,” Dunleavey writes: “How likely is it that a 65-year-old in the U.S. today would live to age 90?” The answer is 25 percent for men and 30 percent of women. That’s a large group of 65-year-olds who can reasonably expect to live at least 25 more years. (For those who are 70, demographers say, more than one-fifth of men and one-third of women will see their 90th birthdays.)
Dunleavey touches on the argument Rajiv has been making all along: thinking about your longevity means taking a wide-ranging view of your future quality of life.
“Living a longer life can compound some obvious factors, like the need for long-term care, but it also introduces new ones,” Dunleavey states. “Where will you live? How might a chronic condition play out, if you forecast a few extra years ahead? You might not have considered an annuity before — but would guaranteed income make life easier? Questions that once had simpler answers due to shorter time horizons now require more interrogation.”
Straight Talk Between Planners and Clients
Dunleavey observes that financial planners aren’t always honest about longevity risk with their clients – and vice versa.
“We used to run scenarios out to age 90, and now many advisers project out to 100,” says Florida-based planner Mari Adam. “But clients still roll their eyes and say, ‘I’m not going to live that long.’ The point is, you have to be prepared if you do.”
As we noted above, U.S. adults still cling to what researchers call survival pessimism – the tendency for those especially in their 50s and 60s to underestimate how long they’re likely to live. The problem, Dunleavey warns, is that this is “the very time when choices about long-term-care insurance or claiming Social Security, for example, may be skewed if people don’t consider the likelihood of living longer.” Failure to plan becomes a self-fulfilling prophecy.
The Kiplinger article includes a link to the Social Security Life Expectancy Calculator and suggests combining that result with your own health and medical history. “From there,” Dunleavey says, “you’ll be in a better position to reevaluate your plan, not only to manage the risks of living longer, but to focus on the quality of those additional years.”
Suggestions on How to “Longevity-Proof” Your Plan
Once again, the Kiplinger article is long, and we’ve had to edit considerably for length. Here’s an abbreviated list of some of the ways Dunleavey and the experts she interviewed suggest that we can begin adjusting our long-term planning to deal with the reality of longevity.
Beware the “House Trap”
Dunleavey explains, “For many people, their home is their biggest asset…yet many retirees are reluctant to tap the equity in their home.” She calls this reluctance “short-sighted.” Her advice: “Before you make any decisions about whether to age in place, do a cost-benefit analysis. How much of your income is being siphoned off by costs like property taxes and repairs? Is the ongoing outlay undermining your long-term security?”
While aging in place seems ideal today, retirement planners note that future circumstances will likely be quite different. In-home care is costly, and aging alone can lead to a sense of isolation. One planner phrased it this way: “Ask yourself: What am I going to want when I’m 90 and can’t drive anymore?”
(We covered some of the downsides of aging in place in this Blog article just last week.)
Rethink Long-Term Care
“The question of how to think about the equity in your home dovetails with the looming expense of long-term care for many retirees,” Dunleavey writes. “It bears repeating that, short of qualifying for Medicaid, there is no government benefit that will pay for long-term assisted living or nursing home care.”
Long-term care insurance is expensive, but it tends to be more affordable the earlier in life you purchase it. But whatever your coverage status, planning for long-term care needs has to be a central part of your retirement plan. According to estimates by Genworth Financial, average monthly costs of assisted living nationwide hover on the high side of $5,000 with skilled nursing care easily costing twice that much.
“People are simply not aware of all their options,” says TIAA’s Kolluri. “It’s crucial to look at these decisions from an educational standpoint.” We urge you to consult an eldercare lawyer and take a proactive stance about what your long-term care options may be.
Don’t Overlook Growth in Your Portfolio
“Time was,” writes Dunleavey, “when growth and its ugly twin, risk, weren’t particularly welcome in long-term financial planning discussions.” But high inflation coupled with greater longevity have forced many to re-think their focus on “security at all costs” for retirees.
“The last few years have emphasized the need for retirees to revisit the idea of growth, even if that means accepting a modicum of risk,” says the Kiplinger article. “The goal isn’t to beef up returns or double your nest egg, but to have a better shot at making sure your assets aren’t eaten away by inflation — especially when you consider the likelihood of another inflationary surge some time down the road.”
Dunleavey suggests an idea that resonates with us: a type of financial dashboard, although that’s not the terminology she employs.
“One way to get more comfortable with the idea of embracing a growth mindset is to ask your adviser to run different scenarios,” she writes. By “running the numbers,” retirees (and future retirees) can gauge the impact of small adjustments over time. Of course, the kind of financial dashboard Rajiv recommends is a far more powerful tool, and we encourage you to contact us so we can refer you to a qualified planner who can assist you.
Women are Particularly at Risk
Writing in Kiplinger, Dunleavey points out that women must pay particular attention to issues related to longevity planning. “Women tend to earn less, spend more time out of the workforce, and to live longer than men,” says TIAA’s Kolluri. “That means many women have less saved for retirement — and a longer span of time when they’ll need assets.”
Financial planner Mari Adam tells Dunleavey that women also tend to be more risk-averse. “The number one mistake women make is keeping too much of their portfolio in cash,” she notes. “So you have to flip the conversation and not talk about risk, per se, but about ending up with a reliable and robust income stream for the rest of your life.”
On top of all those challenges, the average Social Security benefit for women lags significantly behind that of men, generally because their lifetime earnings are lower. Dunleavey writes that the average monthly benefit for men age 65 in 2022 was $2,020, while for 65-year-old women it was $1,638. That translates into nearly $4,600 less in annual gross income.
Be Smart About Social Security
Finally, Dunleavey observes that planning for longevity has a direct impact on when to take Social Security benefits. “One point that deserves the spotlight given today’s longer lifespans, is the timing of when you file for benefits,” she writes. “The longer you wait to file for Social Security, the higher your monthly check will be: about 8 percent more for every year you wait up to age 70.” Remember, too, that spousal benefits are generally much higher if you delay.
The clear conclusion is to defer benefits if you can, because it pays off. While your actual benefit depends on your work history, Dunleavey uses an interesting example to demonstrate her point. In 2024, she notes, the maximum benefit amount anyone who files at age 62 can get was $2,710. For those filing at age 70, it was $4,873. The difference is almost $26,000 in annual gross income, which will be inflation-adjusted over time.
Is This Really “A New Perspective on Planning”?
Dunleavey concludes her article with an important observation. “It wasn’t so long ago,” she writes, “that the de facto goal of any successful long-term plan was to ‘make your money last as long as you do.’ And while that will always be a mantra, there’s a newfound awareness of what you want that money for as you get older.”
While it’s good to hear this “new perspective” from a respected source like Kiplinger, it’s pretty much what Rajiv Nagaich has been saying since he began his career decades ago. We’re giving him the last word.
“I’ve said it a million times,” Rajiv asserts. “Having plenty of money will not guarantee that you’ll have the kind of retirement you dream of having. All the elements of your life have to work together – your finances, of course, but also your housing strategy, your legal plan, your medical coverage, and your relationships with those closest to you.”
He adds, “If your planning takes this kind of holistic approach – no matter how long you live – your retirement years can be rich and rewarding. We’ve helped thousands of people achieve that kind of retirement future, and we can help you as well.”
(originally reported at www.kiplinger.com)